Heartland Financial USA Inc. - Value

By: Zacks.com

Posted: 10/16/2012 1:00:00 AM

Referenced Stocks: HTLF

Heartland Financial USA Inc.
(
HTLF
) has beaten the Zacks Consensus Estimate in the past two quarters,
and is set to report its third-quarter results shortly. Earnings
momentum for this Zacks #2 Rank (Buy) regional bank has been
advancing since its robust second quarter results in July, which
included a positive surprise of more than 67%. Moreover, the
company has a P/B ratio of just 1.6, making it an attractive value
pick.

Earnings Recap

Heartland Financial is expected to release its third quarter
earnings on October 29. The Zacks Consensus Estimate is at 65 cents
per share based on the revenue expectation of $63.0 million.

On July 30, Heartland Financial reported second quarter earnings of
77 cents per share, surpassing the Zacks Consensus Estimate by
67.4% and last year's earnings by 42.6%. An improved top-line
growth was partially offset by higher operating expenses.

Net interest income was $37.2 million, up 1.6% from the year-ago
quarter on the back of lower total interest expense. Non-interest
income surged 92.8% to $28.3 million. Yet, non-interest expense
escalated 28.2% to $41.5 million as a result of rising salaries and
employee benefits costs.

Asset quality continued to show an improvement at Heartland
Financial during the second quarter. As of June 30, 2012, the ratio
of nonperforming assets to total assets was 1.87%, down 80 basis
point year over year. Furthermore, net charge-offs on loans was
$923,000 compared with $6.5 million in the prior-year quarter.

Earnings Momentum Advances

Over the last 90 days, the Zacks Consensus Estimate for 2012 jumped
35.5% to $2.75 per share, implying year-over-year growth of 123.7%.
For 2013, the Zacks Consensus Estimate surged 26.5% to $2.34 over
the same time frame.

Reasonable Valuation

Along with a low P/B ratio, Heartland Financial has a forward P/E
multiple as low as 10.1 (a P/E ratio under 15.0 and a P/B ratio
below 3.0 generally indicate value). The company has a trailing
12-month ROE of 14.1%, compared with the peer group average of
8.7%.

Headquartered in Dubuque, Iowa, Heartland Financial provides
various banking products and services. The company focuses
primarily on clients in the Midwestern, Southwestern and Western
United States, to whom it delivers high-quality financial products
and services. The company was founded in 1981 and conducts business
through 64 full-service banking locations. With a market capital of
roughly $456.0 million, Heartland Financial competes with First
State Bancorporation (
FSNM
) and Old Second Bancorp, Inc. (
OSBC
), among others.

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